Yea, they’re angry! (7 graphs)

Yes, American workers are angry. But not just for one reason—for many reasons.

It took a long time for U.S. political and economic elites (and their friends in economics) to understand that the American working-class has been squeezed far beyond what it can take. Even now, it’s not clear they understand, although the campaigns of Donald Trump and Bernie Sanders have given clear indications that the establishment is out of touch.

Even then, the anxieties and frustrations of U.S. workers can’t be put down to one thing.

But let’s also remember that the share of manufacturing jobs in the United States has been on a steady decline since its peak of 39 percent in 1943.

Still, the drop in the number of U.S. manufacturing jobs accelerated in the new millennium, coinciding with a rise in the offshoring of jobs to and the rise of imports from Mexico, China, and other countries in the process of capitalist development. That’s certainly one key factor.*

But American workers are angry for other reasons—such as the fact that, as Jared Bernstein explains, their wages, which had doubled from the 1940s to the 1970s, have flat-lined since.

Even more: only wages at the top—above the 90th and 95th percentiles (which, as I have explained before, aren’t really like other wages but, instead, represent cuts of the surplus)—have seen any appreciable increase since the start of the Second Great Depression.

Meanwhile, even with slow growth, corporate profits (both financial and nonfinancial) continue to rise to record levels.

Thus, workers are falling further and further behind, while the tiny group at the top continues to pull away from everyone else.

What this means is that every indicator we have—such as average incomes and the share of income captured by the top 1 percent—shows grotesque and growing levels of inequality within the United States.

So, yes, American workers are angry—at the loss of jobs, their stagnant wages, their employers’ record profits, and the obscene and still-increasing levels of inequality they witness every day.

*Daron Acemoglu et al. (pdf) estimate that, considering both the direct and indirect effects, import growth from China between 1999 and 2011 led to an employment reduction of 2.4 million workers—and thus about 40 percent of the decline in manufacturing employment during that period.

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Rich people and big corporations have always had friends in government. Otherwise they would not be so rich or so big. What’s different about those friends today from say 1960? First, today getting what they want is actually made the norm, the way things ought to be done. And the moral thing to do. That has been accomplished in two ways. First, there a large group of professionals (e.g., economists, PR guys, scientists) who speak widely about the normalness of this situation (as experts) and the need to ensure it’s not changed (if we value the best future for the nation and the world). Second, policy makers (people elected to office and the technical experts who support them) have for the first time in US history been almost wholly “educated to ignorance.” That is, policy makers to a large extent share a world view that is based almost entirely on formal education (e.g., MBA) rather than actual experience in business and economic actions. Second, democracy has been so thoroughly undermined that elections and actions of elected legislative bodies either focus on the wrong concerns or no longer even “see” any alternatives to social theories (including ones about economics) that currently organize collective life in the world. Yes, these changes cause and have caused great disruption, pain (physical and psychological) and have in many instances thrown the lives of people into chaos. Can we fix this? Being angry is a normal response but it will not fix the problem. That requires at least these two things. First, the normalness of how life today is organized must be destroyed. Historically speaking when that has happened in the past it was not anticipated or planned. The last such change was the democratic revolutions of the 18th and 19th centuries. And that took years and cost millions of lives and destroyed prosperity for several generations. And even with that the results of the revolutions almost immediately began to be reversed. None of the Presidential candidates (even Trump) even hints at support for such changes. Second, democratic decision making must be made workable again. Simply put that means each and all decisions about collective life must be made via open communications and cooperative agreement. A long way from how such decisions are made today.

I’m not prepared to say in detail what such changes would mean for capitalism as a way of organizing resources decision making. But clearly private control of resources and how they are used will have to come to an end. It’s not likely in my view this will mean the end of markets through which resources are sold and bought. But it does mean all markets will be regulated by legislative bodies to ensure resource choices are consistent with the will of democratically made decisions about how resources are used and what their price is.

“I’m not prepared to say in detail what such changes would mean for capitalism as a way of organizing resources decision making. But clearly private control of resources and how they are used will have to come to an end.”

How do we obtain social justice in a free market system? I once (1999) read a paper on this subject. It doesn’t require leaving free markets, or government intervention, but a change in who makes the decisions about how money in firms is distributed to stakeholders. There are systems of market capitalism where this is done in a more equitable way because employees have a voice in that distribution, in Rhineland Capitalism, in Nordic Capitalism, where bottoms up forms of management exist. But economists, even on this blog, never discuss them. They think the choices are between government bureaucrats control and private enterprise operating in free markets. What about operating in free markets where the constitution of the privately owned firm gives a voice to employees in the distribution of emoluments?

I guess the point along the continuum of ending capitalism all together vs. modifying capitalism toward some compromise that attempts to ensure that private capitalist decisions are overseen and changed as necessary to maximize societal benefits depends on the level of risk with which one is comfortable. I’m risk adverse in the extreme. So I’d like to remove private ownership and decision making about societal resources totally. But I’m fairly certain before that happens (if it happens) compromises like you describe will be attempted. And maybe they’ll even work. In my view private ownership of resources that society requires is simply too tempting a power switch for private owners to ignore in their war to control society. In my view the real choice is between private ownership of resources and markets vs. collaborative decision making and controlled markets for resources required for society to survive and prosper.

blocke

March 20, 2016 at 6:14 pm

The central problem concerns conceptions about what a firm is. In the US, we have a proprietary conception of the firm, which in he late 20th century turned into what is known as director primacy in firm governance. An alternate view of what constitutes a firm is organic, i.e., that a firm consists of owners, employees, and customers, all of which have a legitimate voice in its governance. In a civil society of privately owned firms, operating in a free market, it is perfectly legitimate to give a voice to all parts if you conceive of the firm as an organic entity, impossible to give any voice in a firm’s governance if you conceive of it in proprietary terms. We have strong traditions in Europe that follow the organic conception of the firm, which Americans and Brits treat with contempt.

If the firm or corporation is created as and functions as an organic entity, rather than a proprietary one that makes collaborative decision making an essential element of such firms/corporations. That also removes the focus on profit for shareholders as the exclusive purpose of the firm/corporation. Does this mean the firm/corporation ceases to an economic entity, focused primarily on economic actions? I don’t think so. But it would mean that the economic goals served by this entity would change from servicing the needs of private investors to meeting the economic needs of society. Even hinting at such a change in the USA gets you labeled a socialist and put on Trump’s hit list. Not to mention the hit lists of the Kochs, Mars, Waltons, etc. I agree with you that Europe has moved a good way down this path. All the time being attacked by US corporations wanting to buy up European companies. To demonstrate how difficult such changes will be in the USA I cite the case of the Volkswagen assembly plant opened in 2011 in Chattanooga, Tennessee. Volkswagen wanted to set up worker councils as in their plants elsewhere. That turned out to be impossible because of the protests from local businesses and government. In the eyes of these folks such councils are unions and they hate unions. And even today the plant is under attack in local newspapers and TV stations for paying their workers too much. Angers the other local businesses and the city/county government when VW pay is compared to what workers are paid by other employers in the area. So far other businesses in the area have not matched VW pay levels.

The answer is simple but politically unwelcome. To obtain social justice we need to provide a greater equality of opportunity for people to find jobs and to work. Today, because these opportunities are controlled by a relatively small number of managers, entrepreneurs and land owners, there is a very limited amount of the kind of social justice for which this question applies, when relating to macroeconomics. And the answer is not to demonstrate and rebel because all that will happen is that a lot of people will be upset, but nothing sufficiently basic will change.

To provide equality of opportunity, the government must act in a way that most politicians would cease to advise within their parties, although such a change would provide the benefit needed to the greatest numbers. It is by the introduction of a new kind of tax, which will replace many of the present kinds of taxation. Nobody wants to endure the pressure of a greater tax, but if and when such a new tax lightens the tax burden of the majority, they seem to be unaware that this beneficial effect is stronger than those where the new tax would bear more heavily.

The tax that I am writing about is a tax on land values. No land owner wants to have it applied but the almost immediate results would mean that unused land would find proper use, because the current unused land costs the landlord nothing to hold on to. It should, because it represents wasted opportunities by all those who are out of work due to the high cost of consumer produce. Were land values to be taxed, there would be less fierce competition for access to land because more sites would be brought back into use. This applied to both urban and rural sites. Then the high rents being paid for access rights, would become less punishing and more entrepreneurs would find it worthwhile to set up their businesses. This means less costly produce, more employment, less poverty and greater prosperity!

This story, Dr. Fair, and the model he uses beg the question that is seldom asked. Why is the economic situation important and why is it as important as it is? Millions of Muslim pilgrims journey to Mecca in Hajj. Many are killed along the way even today. But they still make the journey. Not for economic reasons. The “Canterbury Tales” is about a group of pilgrims as they travel together on a journey from London to Canterbury in order to visit the shrine of Saint Thomas Becket at Canterbury Cathedral. Their only economic reward a free meal upon their return. Horatius by poet Thomas Babbington Macaulay, “Then out spake brave Horatius, The Captain of the Gate: “To every man upon this earth Death cometh soon or late.
And how can man die better Than facing fearful odds, For the ashes of his fathers, And the temples of his gods,” Have we wholly lost touch with the other reasons for acting and speaking, for voting and choosing leaders? Yes economic concerns ought to play a part in democratic elections. But have we become so “brainwashed,” so dull and witless that our own economic well being is the primary, or as Dr. Fair suggests the only factor is choosing leaders and making policy? If that is the case then human collective and perhaps even biological life is doomed to extinction. And if so, then good riddance!

Thank you for the post. “http://www.nytimes.com/2016/03/20/your-money/trump-and-sanders-test-economic-model-predicting-a-gop-win.html?ref=todayspaper
Might be more suited for a Lars Syll post, but this will do.”

We aim to help the material and spiritual progress of the people in our country and also in the rest of the world. There are so many less fortunate than ourselves and a smaller number more fortunate, and we wish that the degree of fortune becomes more uniform, but that its differences are due to the way individual talents are divided. This sharing of fortune should be achieved without one kind of person having influence over another and without causing them any offense and with the least damage to the enviroment, but by the efforts of the individual to be successful. A stable macroeconomics system is the best way of achieving this, along with greater access to scientific information, art and health preservation.

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